Comment by nostrademons | Hacker News Reader

Comment by nostrademons | Hacker News Reader

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Keynes would agree with you...in the General Theory, his argument was that the "natural" state of the economy was a liquidity trap. Rising productivity results in an increase in aggregate supply, which results in persistent deflation, which encourages people to hold money instead of investing it, which results in a cap on that productivity.

IIRC, he even suggested that Europe's long period of stagnation during the Dark Ages was because real interest rates were so high that rational entrepreneurs would never invest in new technology, because there was no conceivable way that they could generate a positive return on capital. And that the pyramids were ancient Egypt's solution to the problem of Keynesian stimulus (i.e. nobody was investing, so they built the pyramids to forcibly confiscate money through taxes and then distribute it to workers who would actually spend it).

It makes me wonder what we're in for over the next 10 years. I don't really believe the "permanently stuck in a deflationary trap" theory - there's too much evidence against it. But I think the normal way countries get out of it is through war, which isn't terribly rosy either. In addition to the direct Keynesian stimulus, it also encourages rapid technological development, which opens up new markets that then become fertile ground for investment after the war.

But I think the normal way countries get out of it is through war, which isn't terribly rosy either.

How about an upsurge in space exploration? The colonization of Mars, enabled by plasma rocket technologies like VASIMIR? The exploration and colonization of Mars has been likened to the exploration and colonization of the Americas. Mars has sunlight and soil suitable for cultivation of terrestrial crops, and geology influenced by large amounts of water, which likely means deposits of easily exploitable ores. (The point being, to exploit resources locally, and to use Mars as a base of solar-system wide civilization, not to export back to Earth. Mars is positioned advantageously to be the center of economic power of such a civilization. Earth, disadvantaged by its large gravity well, will become a 2nd rate location.)

It sounds far-fetched, but I think a careful examination of technology will reveal it to be quite plausible. Unfortunately, opportunities for colonization have historically led to war.

It would be awesome if it happened, but what's the motivation? Usually such ambitious projects only happen for regions of national pride. National pride's the same motivation that gives us war, and without the sort of mutually-assured destruction and memories of the last war that we had during the cold war, it's easier to whip up the people into a shooting frenzy.

What's the point? How would WWII have played out differently, if the majority culture across North America was Germanic?

Do you know of any evidence against the deflationary trap off the top of your head?

I don't disagree with your comment. I'd like to read a good article or paper explaining/disproving the deflationary trap.

continual mild deflation during much of the 19th century in america for one.

Yeah, that and that we've had continual economic development over the last 500 years, while nations (and central banks) have come and gone.

> But I think the normal way countries get out of it is through war, which isn't terribly rosy either.

The idea that war has worked to end depressions is well debunked. In any useful measure economies always deteriorate through war. Living standards in the US fell all through WWII and continued falling until demobilization. GDP goes up during war because of weapon purchases. And unemployment goes down when you draft (enslave) people. So these are meaningless measures. You have to look at households.

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